Wayne O'Leary

Massachusetts Gets it Wrong

Massachusetts, home of the Kennedys and erstwhile bastion of
liberalism, has managed to provide Republicans with a gift from the
political gods: In one fell swoop, it's enacted a conservative health
"reform" package and kick-started GOP Governor Mitt Romney's 2008
presidential campaign.

From a purely political standpoint, the decision of a Democratic
Bay State legislature to, in essence, rubber stamp the pet healthcare
project of a Republican governor with White House aspirations boggles
the mind; it's one more reason to wonder why the Democrats exist as a
party. Equally startling is that Sen. Ted Kennedy, patriarch of the
Massachusetts Democracy, blessed the event as in keeping with his
long-standing crusade for universal health insurance, raising serious
doubts about whether the senator's celebrated political instincts
remain intact.

For his part, Gov. Romney, who finished a surprising second to
favorite son Sen. Bill Frist in the Tennessee GOP straw poll last
March, could well steal his party's presidential nomination --
especially with a high-profile healthcare accomplishment on his
resumé. Romney will no doubt campaign as the man who solved
the nation's medical-insurance dilemma with his "tough-love" state
experiment, avoiding new taxes and putting the onus on the
malingering uninsured. In point of fact, he hasn't solved anything,
as will presently become clear, but in politics, perception
rules.

As for the heralded healthcare initiative itself, slated to go
into effect in 2007, it essentially amounts to a compulsory health
insurance program in which every Massachusetts resident not on
Medicare or Medicaid (or rich enough to pay their own expenses out of
pocket) is required to have a private medical policy. This so-called
individual mandate will compel those not insured through their
workplace to purchase coverage on the open market, with sliding-scale
state subsidies based on income offsetting some or all of the premium
cost for the poorest Bay Staters. Private insurers will be encouraged
(but not required) to offer cheap, bare-bones plans to those unable
to afford anything else.

The compulsory aspect of the new Massachusetts law will be
enforced by a schedule of taxes and fines. Uninsured individuals
failing to buy policies will face financial penalties that could
total up to $1,000 or more a year. Also included, in lieu of an
employer mandate, is a largely symbolic annual fee of $295 per
employee imposed on businesses not providing coverage for their
workers, as a purported inducement for them to institute or retain
workplace health plans. The governor used a line-item veto to
initially void this one progressive feature of the legislation, but
was overridden.

Beyond the generally coercive nature of the Bay State experiment
is the uneven application of its system of penalties and incentives.
Individual citizens are hit with a substantial monetary stick if they
fail to obtain insurance; businesses, on the other hand, are only
modestly penalized for not offering employee health plans, and (in
contrast to Maryland's recent legislation aimed at Wal-Mart) they
avoid any legal obligations, a major dispensation. Moreover, the
penalty, really a nuisance fee, amounts to a mere fraction of what
providing employee insurance would cost.

Apologists for the draconian Massachusetts solution to health care
point to the state premium subsidies as its saving grace, yet it's
there that the scheme may be weakest. As formulated, Commonwealth
Care (the program's designation) provides a full subsidy for the
near-indigent -- individuals earning under $9,800 a year. So far, so
good. But the working poor, those earning between $9,800 and $29,400
(or 100 to 300% of the federal poverty level), will be required to
pay monthly premiums they probably can't afford, notwithstanding
access to group rates and the as-yet-unspecified subsidies. The
results could be socially catastrophic.

Even those in the lower reaches of the middle class, with annual
incomes slightly above the subsidy cutoff of $29,400 ($49,800 for a
family of three), will struggle to meet unsubsidized monthly payments
estimated to range anywhere from $300 (for scaled-back individual
coverage) to $500 -- substantially more if dependents are covered.
Nevertheless, "everyone" will be insured, and that's the minimalist
political objective of a plan the Bush administration ideologues
could be proud of and Newt Gingrich, who huddled with Romney, finds
intriguing.

Two major concerns haven't been addressed at all, however. First,
as Robert Haynes, head of the Massachusetts AFL-CIO, has pointed out,
the individual mandate will likely accelerate the decline of
employer-provided health care. Well over 10,000 workers statewide
have lost job-based coverage since 2001, and the new law offers an
excuse for business to drop still more, swelling the ranks of the
uninsured. Second, the Romney blueprint does nothing to control
overall medical expenses, which will continue their inexorable
rise.

Basically, Massachusetts has preserved and reinforced marketplace
medicine. The healthcare industry will still pass on its costs and
pad its profit margins, and a vast array of private insurers will
still milk consumers through annual premium increases. To the extent
state subsidies are applied to rising insurance costs, state taxes
will rise as well -- or subsidies will be reduced. And then there's
the waste and confusion inherent in a complicated, multi-tiered plan
that resembles the Medicare drug benefit in its devilish detail and
administrative red tape.

This is the approach Mitt Romney hails as a "market-based reform
program" that avoids the perennial Republican bugaboo of a
government-run system funded by taxes. Forget that the newly insured
(and the already insured) will pay far more in insurance premiums
than they would in taxes under a universal single-payer framework, an
option the governor was delighted to reject. The objective, which
Massachusetts Democrats bought into wholesale, was to remove the
visible embarrassment (and state expense) of an uninsured population
without departing from business as usual. Let's see how long it will
be before the inevitable unraveling and reassessment.

In truth, the Massachusetts solution to health coverage is a
flawed model that won't translate nationally. What's needed is an
alternative state experiment geared to a simple, uncomplicated
single-payer insurance system operated with tax monies and
incorporating negotiated fee schedules and public cost controls -- a
plan, in other words, divorced as far as possible from the
marketplace. A large blue state with a Democratic governor and
legislature would seem the place to try it -- perhaps a
post-Schwarzenegger California.